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Workers to feel pain of new labor pension plan

To save costs after the new pension system is implemented in July, companies are mulling modifying their compensation management measures, mainly by reducing fixed salaries and increasing variable salaries, human resource experts said yesterday.

Starting in July, employers are required to direct 6 percent of employees' salaries per month -- up from 2 percent -- to an individual retirement labor pension fund. The new system allows employees to build up their retirement fund even if they change jobs, and draw a monthly pension after they retire.

The new system, however, has raised concerns among employers who will need to budget more funds to their employees.

"Although most employers said they will retain their current salary levels for the first year, many are considering adjusting the ratio of base salaries and variable salaries," Chen Chi-kuo (陳基國), manager of Taiwan Semiconductor Manufacturing Co's (TSMC, 台積電) human resource division, said at a seminar yesterday.

Citing a survey of 94 companies conducted by the Hsinchu Human Resource Management Association (新竹人資管理協會), National Central University's Graduate Institute of Human Resource Management and the Chinese-language monthly magazine Career (就業情報), Chen said 42.6 percent of respondents said they plan to increase variable salaries -- which are non-pensionable -- and reduce fixed-salaries -- which are pensionable -- after the new system goes into effect.

For example, Teco Group (東元集團), is planning to adjust its salary structure to half fixed salaries and half variable salaries for its management-level employees, Lu Yu-lin (陸幼麟), director of Teco's human resource bureau, said at the seminar.

Along with base salary, Teco integrates various bonuses, including compensation and stock options, into its fixed pay, while the variable salary is determined by the individual employee's performance, Lu said.

Yu Ying-chi (游英基), Acer Inc's chief human resource officer, said the introduction of the new system provides a chance for companies to review their manpower policies.

He suggested that companies apply a pay-by-performance measure for employees who work for their core businesses, in order to increase incentives, while outsourcing non-crucial work to save money.

Dorothy Tao (陶尊芷), senior vice president of HSBC Taiwan's human resources division, suggested companies make their salary structure fair and full of incentives to boost employee morale.

The new system will also impact the range of raises this year, Chen said. Companies, on average, gave raises equal to 3.6 percent of salaries last year, but only 3.2 percent this year, he said.

According to the poll, other strategies companies might use to cope with the implementation of the pension system are layoffs, hiring freezes, using more temporary employees, or moving production lines overseas.
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